Asset Protection: Sometimes, being attached to your spouse means that your creditors cannot attach your assets

In Business Law, Estate Planning, General by Coolidge Wall

HISTORY LESSON: Back in days of yore (2/9/72 – 4/4/85) in Ohio, a form of property ownership known as Tenancy By the Entirety (TBE) was recognized. The TBE form of property ownership harkens back to times when women had much less control over their affairs and needed to be protected from their husband’s debts. It is useful now to protect assets from creditors.

“TBE” EXPLAINED: The general principle behind TBE property is that it is not owned part by husband and part by wife, but entirely by a fictional third-party made of the union of husband and wife. As such, only creditors of husband and wife can attach TBE property.

Although Ohio’s statutes no longer provide for TBE property, some other states still recognize TBE property with interesting wrinkles relating to:

  • form for invoking TBE ownership (i.e. presumed, “magical” words required to create it, unities of time of ownership, etc.),
  • extent of protection provided (i.e. full protection (other than against federal tax liens,See Drye v. U.S., 528 U.S. 49 (1999) and U.S. v. Craft, 535 U.S. 274 (2002))), protection akin to a life estate, protection until the non-debtor spouse dies, etc.),
  • types of property protected (i.e. all property or land only), and
  • residency requirements (i.e. whether husband and wife must be residents of the state for enforcement).

State Extent of Protection Provided* Types of Property Protected**

Alaska Limited Real and Personal
Arkansas Limited Real and Personal
Delaware Full Real and Personal
District of Columbia Full Real and Personal
Florida Full Real and Personal
Hawaii Full Real and Personal
Illinois – FN1
Indiana Full Real ONLY
Kentucky Limited Real ONLY
Maryland Full Real and Personal
Massachusetts Limited Real and Personal
Michigan Full Real ONLY
Mississippi Full Real and Personal
Missouri Full Real and Personal
New Jersey Limited Real and Personal
New York Limited Real ONLY
North Carolina Full Real ONLY
Ohio – FN2
Oklahoma – FN3
Oregon Limited Real ONLY
Pennsylvania Full Real and Personal
Rhode Island Full Real and Personal
Tennessee Limited Real and Personal
Vermont Full Real and Personal
Virginia Full Real and Personal
Wyoming Full Real and Personal

** See
FN1 Only available for personal residence
FN2 Available from 2/9/72 – 4/4/85 (deeds between those dates are still recognized)
FN3 The asset protection value of TBE ownership was abrogated by statute on 5/7/45 (60 Oklahoma Statutes 1991 § 74

As such, Ohioans can take advantage of TBE protections of states without residency requirements.

WARNING: The methods for using TBE protections are complex and should not be used for asset protection or estate planning without investigating the state’s laws regarding effectiveness of TBE protection in each instance. The laws of the state where real estate is located is generally used when issues arise relating to that real estate, but that is not always the case when it comes to personal property. See e.g. Reif v. Reif, 86 Ohio App.3d 804 (2nd Dist Ohio 1993). So while a court in Florida (for example) should recognize and protect personal property held as TBE property by Ohio residents, a court in Ohio may not recognize the protections of TBE ownership for personal property attachable in Ohio – such as a bank account held at a bank with branches in Florida and Ohio.

BOTTOM LINE: Since some situations and state laws will allow Ohioans to protect property using TBE ownership, it might be worth “tying the knot” or avoiding “untying the knot” to protect property interests from creditors.